Song Hong Garment is looking at bleaker prospects after the collapse of New York & Co, its largest overseas partner, fearing a scenario akin to that experienced by Thanh Cong Textile Garment Investment with Sears.
|New York & Co's collapse will likely dent the performance of Song Hong Garment |
According to the Washington Post, RTW Retailwinds that owns 400 New York & Co stores across 32 states of the US, filed for bankruptcy last week. Specifically, the company is considering whether to shut down all of its outlets soon.
New York & Co is a long-time partner of local garment manufacturer Song Hong Garment (HSX: MSH). As of the end of 2019, the US firm was responsible for 13 per cent of MSH’s revenue, according to a company filing to the State Securities Commission of Vietnam.
In 2019, MSH’s earnings rose by 12 per cent to VND4.412 trillion ($191.83 million) of which New York & Co contributed VND575 billion ($25 million). Facing the COVID-19 breakdown, the local garment firm targets a 27 per cent reduction in revenue to VND3.2 trillion ($139.13 million).
The latest financial report of MSH showed that the company’s receivables as of March 31, 2020 were VND439 billion ($19 million), including VND166 billion ($7.2 million) from New York & Co, which is more than one-third of the sum.
On the verge of losing millions of US dollars, trithuctre.vn quoted a representative of MSH as saying that the firm foresaw the hardships and set aside provisions in the first quarter of this year. Moreover, it also plans to keep making provisions in the following quarters. Regarding the recovery of the $7.2 million, MSH has contacted the partner but has yet to receive a response.
Regarding the bankruptcy of New York & Co, the representative said that MSH’s finances have yet to see significant impacts, however, if the pandemic lasts in the EU, it will be hard to predict the company's future performance. Currently, the firm maintains operations by manufacturing face masks and protective gear.
Two years ago, Thanh Cong Textile Garment Investment (TCM) was trapped in a similar situation as its big partner – the US-based Sears Holdings filed for bankruptcy in the nation. Sears’ 49 subsidiaries, including Roebuck, Co. and Kmart Corporation, was a major partner of TCM, making up about 7 per cent of its revenue. At the time, TCM's receivables consisted of VND100 billion ($4.35 million) from Roebuck and Kmart Corporation and more than VND500 billion ($21.74 million) from the parent company.
As a result, its revenue last year slightly dropped by 0.5 per cent on-year to VND3.644 trillion ($158.43 million). In addition, net profit from sales spiked by 8 per cent to VND269 billion ($11.7 million) while the profits from the other performance plunged by 93 per cent to VND5 billion ($217,400). That made pre-tax and after-tax profits decline by 15 and 17 per cent to VND274 billion ($11.9 million) and VND217 billion ($9.43 million).